Housing Double Dip Data Can No Longer Be Downplayed

It’s ironic that regardless of all the hype around “green shoots” and hopium filled speeches to inspire investor confidence that real estate — when left to a solely organic recovery without any sort of government induced steroid-like stimulus program — will likely take years, if not decades, to get to 2006 real estate bubble prices.

The sad thing is that so many sources, both governmental and private industry, went out of their way to give everyone the “all is well” spiel while knowing it was anything but.

And the new homes sales data released today is just one more coffin nail. Then again, if you’ve been following the real estate topics covered on this blog, you knew that years ago.

Not really. I’ve been waiting for real estate to fall, and fall hard, since 2004, so it’s not a big shock. Which is one of the reasons I’m so big on looking for borrowers with secure jobs, been with the same employer for a long time, as well as checking the Q&A section for homeowners who are underwater.

There are one or two investors who always ask “are you underwater?” or “how much do you owe on your mortgage & your home’s value on Zillow.com”. So you use their questions and then avoid them if that’s part of your strategy, and if the borrower is underwater by 10s of 1000s, then yes, I’ll look elsewhere.

That’s tough. The empathy in me feels for everyone involved, but the vulture investor in me wants to go hunting for those $1 houses now. Even if you rent it out for $100/month, you’re making a killing percentage wise.

Mar 25, 201110:32 am

#5 Dan B :

Except that the $1 houses come with a tax bill & require $20k+ worth of repairs since every conceivable thing down to the wiring has been stripped out of it. And once you have it all sorted out you better have someone ready to move in or you’ll be doing that whole routine over & over again. And it’s not just Detroit. Even it here in the Central Valley of California (Modesto, Stockton etc) these scenarios are playing out with the difference being that the houses aren’t at $1.

Mar 28, 201111:56 am

#6 Tomare Utsu Zo :

“will likely take years, if not decades, to get to 2006 real estate bubble prices.”

The irony in that statement is … I can’t even describe it. See, the political rhetoric for the .gov interventions that created the conditions for the bubble was basically, “Hey, we .gov’es can make housing affordable.” Well … housing sure is a lot cheaper. Though, I guess one might say they still failed at that because price is only one side of affordable, income is the other side.

Few have been a harsher critic of the government intervention in the housing markets, and other so called “free markets”, as me, but I do see the irony in my former statement.

The real irony, at least from my vantage point, is the very thing that made the housing bubble possible — the credit bubble — is now being referred to as the savior to get us all out of the mess. In that respect, it’s like drug addict rehab: if you force them to go cold turkey, the shock will be so severe that it’s detrimental to the patient. Too bad few people have the confidence or the income to qualify (by conventional standards).

But in a few decades, I do see prices recovering to inflated levels. With the amount of inflation we’ll see in the coming years, prices will eventually respond upward.